Cyprus to protect savers with less than €100,000 from levy

CYPRUS last night looked set to raid big savers’ bank accounts far more heavily than originally planned, sparing those with deposits of less than €100,000 (£85,822) by levying a 15 per cent tax on those with higher savings.

The move came after Eurozone ministers urged Cyprus to let smaller savers escape the levy, ahead of a parliamentary vote today that will either secure the island’s financial rescue or threaten default. Desperate politicians have again extended the island’s bank holiday into tomorrow to give them time to agree a deal and seize the money before depositors can withdraw cash.

Cyprus needs to raise €5.8bn from depositors to recapitalise its banks, as the Eurozone and IMF do not want to lend the state more than €10bn. The initial plan would have seen savers with less than €100,000 – the level which EU states guarantee – lose 6.7 per cent and those with uninsured deposits lose 9.9 per cent.

But fears across the EU that this would undermine the deposit insurance scheme and unjustly hit the poorest meant politicians had to delay their vote on the scheme and negotiate a different deal.

“The Eurogroup continues to be of the view that small depositors should be treated differently from large depositors,” the bloc’s finance ministers said in a statement.

Cypriot politicians are now expected to vote today, passing the scheme and taking the funds before banks open again on Thursday.